FinanceQuestion 71 of 120
In an amortized loan, each monthly payment is applied to:
a.Both interest and principal, with interest typically higher early on
b.Principal only for the entire term
c.Interest only for the entire term
d.Property taxes only
Explanation
In a fully amortized loan, each payment covers accrued interest and reduces principal, gradually paying off the balance over the term. Early payments are mostly interest, and later payments are mostly principal. By the final payment, the balance reaches zero.
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